Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2020 Medical Properties Trust Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Charles Lambert, Vice President. Thank you. Please go ahead.

Good morning. Welcome to the Medical Properties Trust conference call to discuss our third quarter 2020 financial results. With me today are Edward K. Aldag, Jr., Chairman, President and Chief Executive Officer of the company; and Steven Hamner, Executive Vice President and Chief Financial Officer. Our press release was distributed this morning and furnished on Form 8-K with the Securities and Exchange Commission. If you did not receive a copy, it is available on our website at www.medicalpropertiestrust.com in the Investor Relations section. Additionally, we're hosting a live webcast of today's call, which you can access in that same section. During the course of this call, we will make projections and certain other statements that may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our financial results and future events to differ materially from those expressed in or underlying such forward-looking statements. We refer you to the company's reports filed with the Securities and Exchange Commission for a discussion of the factors that could cause the company's actual results or future events to differ materially from those expressed in this call. The information being provided today is as of this date only, and except as required by the federal securities laws, the company does not undertake a duty to update any such information. In addition, during the course of the conference call, we will describe certain non-GAAP financial measures, which should be considered in addition to and not in lieu of comparable GAAP financial measures. Please note that in our press release, Medical Properties Trust has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. You can also refer to our website at www.medicalpropertiestrust.com for the most directly comparable financial results and related reconciliations. I will now turn the call over to our Chief Executive Officer, Ed Aldag.

Thank you, Charles, and thank you, everyone, for listening in today to our 2020 third quarter earnings call. We always appreciate your interest in MPT. As I prepared for today's call and made my presentation to the Board earlier this week, I realized that I have never been more excited about our performance and the future of MPT. In really simple, but important terms, for years, we have been steadily executing on the MPT strategy and business plan. While the COVID pandemic has been a worldwide tragedy, it has absolutely further validated our model. Hospitals are the center point of the health care delivery system all over the world, and civilizations will do whatever they have to to ensure their populations have access to hospitals. During one of the worst pandemics the world has seen, MPT has delivered a year-over-year increase in our FFO of 24%. Our operators are performing beautifully across the world. They have strong liquidity, strong operations and none of them are suffering from any capacity issues or lack of supplies. We have been able to acquire more than $3 billion of new investments in this new world of Zoom and limited travel. Our offices in Europe and Australia have proven invaluable and our historical performance and reputation among operators have served us well. Our pipeline remains strong and manageable. We have no need to do any traditional equity offerings to meet our needs in the near term. Steve and our internal capital markets and finance teams have done a great job of managing our needs in a way that keeps several efficient funding options on the table. I can end my update at this point because it is truly that simple and that strong. But let me continue with more detail. Our hospitals are all back to essentially normal operations. They range from low 90s to over 100% of where they were in 2019. When COVID first hit, hospital operators across our portfolio did a fantastic job of cutting expenses and streamlining operations. All of our operators have strong liquidity positions and all are looking forward to new opportunities. As predicted, the backlog of nonemergency surgeries has pushed surgical volumes back to pre-COVID-19 levels at many of our hospitals and some even ahead of budgeted and prior year numbers. For instance, our hospitals in Spain have seen an increase in outpatient and surgical volumes as the backlog at the public hospitals has forced them to redirect patients to our private hospitals. This has created a fortuitous opportunity for our Spanish operators as these patients experience firsthand the top-notch facilities and care provided at these private hospitals. In the U.K., private operators, including our operators, continue to operate under their unprecedented collaborative agreements with the NHS to ensure excellent health care. Volumes continue to increase within the private hospitals from their early second quarter lows to 90% to 100% of prior year averages by the end of the third quarter. The recently announced NHS contract for up to GBP 10 billion for the private sector represents a significant opportunity to partner with the NHS on their increasing waitlist backlog, which is expected to approach 10 million people by the end of 2020. In Germany, positive cases have increased in recent weeks. However, MEDIAN, our German rehabilitation operator, continues to see overall volumes approximating 2019. In fact, their volumes are currently exceeding where they were in 2019. Australia continues to see its number of overall COVID cases stay relatively low. And not only is our operator there doing well, but is actively engaged in expansion. Throughout the worst of the pandemic shutdown, we continued to collect almost all of our rent. As of October 1, we are collecting essentially 100% of our rent, including interest on the deferred portion from earlier in the year. Before transitioning to my usual comments on coverage ratio reporting, I'd like to share some general thoughts regarding the current political conversation involving hospitals. Over the 35 years I've been investing in hospitals, the legal obligation of hospitals to treat all patients regardless of their ability to pay has been a constant. And the amount of funds spent at hospitals has only increased. Since CMS began tracking nominal U.S. health care spending at hospitals in 1960, 12 presidential administrations ago, nominal spending at hospitals has grown at an 8.8% compound annual growth rate with no single negative year. I say this because Republican or Democrat, no ACA or expanded ACA, an increasing amount of money is likely to be spent on hospitals. Each generation expects to have better health care than the last. Countries will continue to fund health care even in the worst of times, as we've seen during this pandemic. For the last 35 years, I've seen many changes in how hospitals are reimbursed. But the one constant is that as a population, we have always demanded and gotten better health care. Relative to the $1.2 trillion spent at hospitals as officially measured in 2019 in the U.S., the impact of potential changes or repeal of the Affordable Care Act is marginal. Our experience tells us that in any case, the same doctors will treat the same patients, overall spending will grow and our rent will be paid regardless of changes resulting in shifts in payer mix and any related health care insurance reform. Now to coverages. Just to remind everyone, we report coverages one quarter in arrears because at the time we do our earnings call, we do not have all of the quarter ending information from our operators. So the coverages we are reporting are for the 3-month period ending June 30. Also, please remember that all of our operators were asked to shut down all elective surgeries and other procedures in anticipation of COVID-19 patients that really never materialized. This period was basically March through April or May. So for most of the second quarter, our operators were essentially closed. As you will also recall, through the CARES Act in the U.S. and other forms of funding from other governments in our other eight countries, our hospitals received funding to cover the shutdown period. In the U.S., the funding came in two forms: grants, which are scheduled to be kept by the operators, and the other in the form of Medicare advances which are currently slated to be repaid. Our largest U.S. operators received approximately $1.6 billion in grants and $2.3 billion in advances. The same operators are sitting on approximately $5.4 billion in liquidity. So should they be required to repay the advances, they are in good shape to do so with plenty of excess liquidity. This pandemic has made coverage reporting difficult. We told you at the end of the first quarter that the elective surgeries and procedures were all medically necessary and would indeed come back. They would not just disappear. We were 100% correct about this. So in an attempt to show you as much clarity as we can, I'm going to report the EBITDARM coverage two ways: one, without any grants or advances; and one with grants added. In neither case are we including the advances as they are scheduled to be repaid. Furthermore, in the formula which includes the grants, we're going to include 100% of the grants, even though at this point not all of the operators have included the grants in their published numbers. Now let me provide a quick update on our existing portfolio. We removed two acute care properties from our same-store reporting this quarter that are no longer owned by us. So first, without grants, our same-store portfolio EBITDARM coverage for all sectors total portfolio for the trailing 12 months Q2 2020 was 2.12x. Same-store acute care EBITDARM coverage was 2.16x — that's even during the pandemic, still coverage over 2x — which represents a 29% decrease year-over-year. LTACH EBITDARM coverage was 1.99x, which actually represents a 23% increase year-over-year. Inpatient rehabilitation hospital EBITDARM coverage was also over 2x, 2.04x to be exact, which represents a 1% increase year-over-year. And remember, those numbers were without any additional grants. Now second, with the grants included, our same-store portfolio EBITDARM coverage for all sectors for the trailing 12 months Q2 2020 was 3.17x. Same-store acute care EBITDARM coverage was 3.56x, which represents an 18% increase year-over-year. LTACH EBITDARM coverage was 2.29x, which represents a 41% increase year-over-year. Inpatient rehabilitation hospital facilities EBITDARM coverage was 2.14x, which represents a 6% increase year-over-year. It is amazing to think that during a year of such unprecedented disruption and uncertainty that MPT will successfully underwrite and close on $3.1 billion in investments. Not only is this a testament to our business model and the increasing acceptance and understanding of it by hospital operators throughout the world, but also a testament to our team. No matter the circumstances, MPT can move quickly and adjust and adapt to a new way of doing business and maintain our level of excellence and unparalleled growth. Nevertheless, we're not done, not even close. As the buyer of hospitals — as the largest buyer of hospitals in the world — we see materially every potential opportunity, underwrite the more promising transactions over the course of multiple years. And as you know, we are willing to execute when deals both meet our standards and generate immediate earnings accretion. It is this logic that drove 24% normalized FFO per share growth in the third quarter and ranks us #1 among U.S. REITs exceeding $3 billion in equity market cap and 2020 FFO growth. Though it is still too early to announce any specific acquisition goals for 2021, we are confident in our ability to continue to grow and to do it prudently. But let me remind you again: if we do nothing else, if we just stop acquiring as of today, we are tracking at the high end of our guidance range. COVID-19 has certainly created innumerable changes in our lives, but it is comforting to know one thing is constant: the quality health care will continue to be delivered in hospitals throughout the world. We are proud of our operators and their employees and providers for making it happen. Medical Properties Trust and our team is honored to be a part of the total team. Steve?

Thank you, Ed. This morning, we reported normalized FFO of $0.41 per diluted share for the third quarter of 2020. As Ed has pointed out, this is a 24% increase over 2019's third quarter and is consistent with the run rate guidance of $1.68 to $1.71, which we affirmed in this morning's press release, and a midpoint of which is a 31% increase over 2019's actual annual results. When considering the full quarter timing of transactions closed during the third quarter, our annualized normalized FFO was well within our guidance range. And moreover, we are not yet recognizing revenue at our two active development projects or from our significant number of expansion and renovation projects which, in the aggregate, contribute meaningfully to our earnings growth. Just as a quarterly reminder, due to the magnitude of our external growth over the past several years and the unpredictable timing of these acquisitions, we have historically provided estimates of run rate normalized FFO instead of attempting to predict with precision when particular acquisitions will actually close. Our guidance represents the stabilized earnings of our in-place portfolio, additional transactions closed or under binding agreement, ongoing development and renovation projects and expected recycling transactions. For example, we will sometimes receive payment for mortgages or repurchases that are expected to be reinvested with the same operator in the foreseeable future. As Ed mentioned earlier, we are collecting virtually all rent contractually due and fully expect to collect roughly $12.5 million in rent deferred in the earlier parts of the year. That is with interest, by the way. While the contractual collectibility of these amounts justified their full inclusion in our earnings, we conservatively excluded $5.4 million of these amounts from adjusted funds from operations in the third quarter, down from $7.2 million in the second quarter. Before moving on to remarks about outlook and near-term investment plans, it's worth mentioning a few items that were notable in the third quarter despite their exclusion from our normalized FFO. We recorded a one-time income tax expense of $8.5 million, primarily as the result of corporate tax rate changes in both Switzerland and the United Kingdom. Also, we wrote down straight-line rent of about $1.3 million in the quarter related to the sale of one small freestanding emergency facility and to our transitioning of five other freestanding emergency facilities to affiliates of HCA and Methodist Health Care in Texas. Finally, we recorded a $1.6 million fair value adjustment gain on our equity investment in AEVIS, the parent of our tenant Swiss Medical Network. During the quarter, we closed on roughly $350 million of accretive transactions with three separate operators. In early August, we added another German post-acute facility to our portfolio of properties operated by MEDIAN at a cost of EUR 12.5 million, using euro-denominated cash already on our balance sheet. In addition and also in early August, we acquired the BMI Woodlands Hospital in the U.K. that is operated by Circle Health for GBP 29.4 million. The facility is home to highly rated orthopedic and ophthalmic specialists and has long been meeting the needs of the population of Northeast England. As we expected, as of last quarter's call, we closed on the Prime St. Francis Medical Center in Lynnwood, California in August at total consideration of $300 million. All three of these highly sought-after facilities provide cash and GAAP yields that generate immediate and strong per share accretion. This is how we continue to drive double-digit and market-leading FFO and AFFO growth. As a further example, as part of the Prime St. Francis acquisition, this hospital has been joined to an existing master lease for which Prime has executed early a five-year extension, giving this $500 million portfolio a new 15-year term. In testament to its financial strength, Prime recently priced a $700 million notes issue, proceeds of which will be used partially to repay roughly $280 million in mortgage loans from MPT that would otherwise mature in 2022. As evidenced by the St. Francis acquisition, we expect to continue to grow with Prime, recycling capital as appropriate. It's also important to point out that by the end of this year, we expect our real estate mortgage portfolio to represent less than 1.25% of our assets. That's down from almost 8% as recently as the end of last year. We have occasionally provided mortgages as an accommodation to our tenant tax strategies, but our preference is almost always that we are the owner lessor rather than a lender. We have reduced this mortgage exposure primarily by acquiring the underlying mortgaged assets rather than simply taking dilutive repayments. This is always our strategy going into mortgage transactions, and our successful execution of it over the last couple of years is even more evidence of MPT's underwriting skill and structuring creativity. As mentioned last quarter, we continue to expect our first property investment in Colombia to close in the fourth quarter at a value of roughly $135 million, including facility improvements that were not included in our initial $100 million estimate. Given the Colombian government's commitment to health care and the location of these three hospitals in dense underserved markets, we believe the joint venture operator we formed last quarter will be effective in improving the care delivery and profitability of these facilities. As mentioned earlier this morning, we affirmed our $1.68 to $1.71 run rate guidance. This is based upon third quarter annualized normalized FFO of approximately $1.66, $0.02 of incremental benefit from the timing of third quarter and early fourth quarter close transactions, $0.03 of accretion from ongoing development and redevelopment projects and pro forma leverage that remains within our long-term target range. Pro forma for the investments and other transactions I have just described, our net debt-to-EBITDA ratio remains in that 6x area. In terms of liquidity, we are in an excellent position with roughly $1.25 billion of cash and revolver capacity and almost $700 million of remaining capacity on our ATM facility, on which we were selectively active since the end of June. On an AFFO basis, our retained earnings is estimated to provide at least $150 million annually over and above current dividend payments. And we expect to receive a similar amount of cash liquidity from miscellaneous and nondilutive sales and refinancings over the next few quarters. Finally, large institutions continue to pursue opportunities with us for joint venture investments in hospital portfolios. As many of you know, we have executed joint venture transactions in the past at very attractive terms for MPT, and we continue to explore these opportunities. What this means to us is that we believe we have a number of alternative capital sources to continue our double-digit accretive growth in coming quarters, while maintaining our prudent historical leverage targets and avoiding the more expensive and dilutive capital-raising strategies during recent market conditions. With that, we'll turn the call back to the operator for questions. Operator?

Your first question comes from the line of Steven Valiquette with Barclays.

A couple of questions here. I guess just looking at some of the September quarter results from publicly traded hospital operators like HCA and Tenet over the last week or two, in my sense we're probably back to maybe 90% of pre-COVID hospital patient volumes at the end of the third quarter, whereas maybe around 50% for the industry back in the June quarter. So just curious if you generally agree with that broad characterization for your portfolio of the U.S. operators without agreeing to those exact numbers, but just generally speaking whether it makes sense to use those publicly traded comps as a proxy of your underlying portfolio in the U.S.?

Steve, hope you're doing well. Two answers to that question. First of all, our portfolio is generally on a volume basis doing better than that. We have some operators that are well over 100% of where they were in 2019. We have some that are as low as in the low 90s, 92%, 93%, but the average is much closer to 100%. But keep in mind that just looking at the volumes is not a good measure. I think that if you look at the community health systems report they did yesterday or the day before, when this first hit, all hospital operators, particularly in our portfolio and some of the publicly reported ones that we've seen thus far, did an incredible job of cost cutting and getting their costs under control. So I think that if you look at the volume and it says 95% of what they were doing in 2019, it doesn't necessarily mean that they're only generating 95% of what they generated in EBITDA in 2019. Our hospitals across the board, in Europe, Australia and here in the U.S., are doing very well. And every one of them, certainly all of the big ones, are looking for opportunities and have opportunities to grow. So we feel very good. Listen, we told everybody back when COVID first hit and the governments around the world — I'm not pointing fingers at anyone because you can't sit here and look at it in hindsight — we didn't know what this was going to do. We didn't know what COVID was going to look like. The models were showing a tremendous number of patients and beds that were needed, and that just didn't materialize. And so we had hospitals that sat vacant for 2.5 months. We certainly don't ever have to do that again. You need to remember that the press is very sensational. It amazes me sometimes because I live this business, some of the reports that I hear. I actually have been in Utah recently and I was listening to reports from the news channels telling everyone in Utah that they were going to have to start rationing care again because all of the hospitals were turning away patients. That's just absolutely not the truth. Maybe the one hospital that they were talking to is a public hospital. But even there, I know some of the facts as to why that's not true. Our hospitals — we're the largest owner of hospitals in Utah — we are not in danger of being out of ICU beds at any of our hospitals, and certainly not in danger of having to ration health care in any fashion. Every one of our hospitals is fully open for all of their surgical needs. So it's really amazing to see where we've come since March, April and May of this year.

Yes, that's great. I appreciate that color. And yes, you're right — the acuity mix is leading to EBITDA results that are maybe even slightly better than some of the volume trends, so that's not lost upon us as well. I appreciate that color, too.

Absolutely.

Your next question comes from the line of Michael Carroll with RBC Capital Markets.

Steve, can you provide some color on the potential JV opportunities that you mentioned in your prepared remarks? I guess, what type of opportunities are you looking at in your portfolio today? And are you pursuing those deals or trying to find partners to pursue those deals? Or is that just still kind of in theory right now?

Well, no, it's not theory by any means. I'll just remind everyone on the call that may not know our whole history: we have basically half a dozen JV arrangements right now, the largest being the transaction we closed about two years ago in Germany where an institutional investor — a very large institutional investor, in this case an insurance and asset manager called Primonial in France — bought half of our German portfolio at very, very attractive and compressed cap rates versus what we had originated those leases to be. Since then, not only in Europe but in Australia and increasingly in the U.S., we're seeing more interest from similar type institutions and others, including sovereigns and other private equity and public pension funds, similar institutions as Primonial and AXA with whom we've done other joint ventures. So we are working conceptually around more than one potential transaction that would look similar to what we did with Primonial — basically selling a portion of a discrete portfolio, very attractive pricing, especially compared to pricing in the public equity markets today. But there is nothing specific to report at this time.

And then I remember when you were pursuing the German portfolio JV, the lead time or the timing to get that transaction done was pretty long. I guess, if you do elect to do a JV, how long do you expect it will take? Is this something that could be announced in the beginning of 2021 to help fund some of your 2021 investments that you have planned that Ed kind of mentioned that the pipeline is pretty strong? Or what's the thought process around that?

So we wouldn't expect it to take us long. A lot of things have changed since then, including the rapid increase in interest from institutional and other passive investors for this type of product. The other big issue being we've been through it now; we are much bigger. When we started those negotiations, it was actually more than three years ago. Since then we've added many billions of dollars in assets to our own ownership. So we have a number of alternatives and opportunities to slice and dice. And again, given the continuing search by these institutions for yield, we think we could accelerate the underwriting and closing process. We certainly wouldn't enter into negotiations if we didn't think that. Insofar as timing, we've got nothing to announce now and no prediction of when that may happen.

Your next question comes from the line of Connor Siversky with Berenberg.

A quick one for me. Could you touch on portfolio vacancy at all? And then any opportunities to lease any available space in the near term? Or any color on what impact that could have looking forward?

It's a very good question. And there's very limited portfolio vacancy. Obviously, most, if not all, our buildings are single-tenant occupancy. So when something is vacant — is not generating any earnings — it's the very limited amount of facilities and mostly they are the old Adeptus facilities that we've discussed in recent quarters. There is no inclusion of any potential re-leasing of those facilities in our guidance. But on the other hand, if we were to re-lease 100% of them tomorrow, it's just not going to move the needle that much on guidance because all in, Adeptus has been very, very successful, and what we end up with now are really the bottom tier. And there's just not that much of it. There are opportunities, and I mentioned it very briefly in my prepared remarks about potential sales that would generate additional liquidity and basically free capital because they would be nondilutive. In addition to those old Adeptus facilities I just mentioned, there are way less than a handful — a couple or so other facilities that were not recognizing any income and yet have, we believe, a fairly substantial value, relatively speaking, which we are hopeful of. I think we have reason to be hopeful that we could generate upwards of another $100 million, plus or minus, in the near term in potential sale proceeds.

And Connor, I'll add to that just briefly: while Steve is absolutely right, it's a very small number. Very interestingly, as people have gotten comfortable with where we are post-COVID, we actually have a number of people negotiating with us for these facilities. So while it won't move the needle, it's nice to have all the interest.

Your next question comes from the line of Joshua Dennerlein with Bank of America.

Two, really for me. I guess, just globally, where are you seeing the most opportunities as far as acquisitions go? And then how are you guys thinking about health systems and maybe how they might consolidate or change post-COVID, and how that might impact your opportunities?

So Josh, the pipeline continues to be split in the 60-40 range: 60% in the U.S., 40% outside of the U.S. It's primarily in the nine countries that we're currently in, which includes the U.S. There are some small opportunities in some of the smaller countries in Europe, but it's primarily where we are. And it is mostly with new operators, and it is almost entirely, maybe 90% general acute care hospitals from a dollar standpoint. From an opportunity standpoint with systems, we continue to see a lot of interest in the for-profits buying some of the not-for-profit entities. We see a lot of continued interest, particularly post-COVID — post-nightmare COVID, I guess — from the not-for-profits that really need to have more than just one facility that are willing to sell at this particular time. So we continue to see good opportunities. I think everybody when COVID first hit, obviously everybody put everything on hold, and we were scared to where this was going to go. But as I said in my prepared remarks, it is amazing how everybody we are working with is looking for opportunities right now.

Your next question comes from the line of Sarah Tan with JPMorgan.

This is Sarah Tan on for Mike Mueller. Just two questions for me. The first one is on coverages: where do you expect them to trend given the aid? And secondly, do you expect to add on to your development pipeline even though there are just two projects in there right now?

So Sarah, I hope you're doing well. On the first part of the question, we expect coverages to continue to trend up. As you saw from the remarks earlier, even without any federal grants and a 2.5-month shutdown, our general acute care hospitals still generated more than a 2x coverage. Our LTACHs and inpatient rehabilitation hospitals actually increased. The LTACHs increased significantly. The rehabilitation hospitals increased some. In Germany, where we have the largest number of rehabilitation hospitals, those hospitals did exceptionally well all throughout the COVID crisis, and we expect that to continue. We really don't see the situation of having hospitals shut down again. Again, I'm not pointing fingers at anyone. I think in hindsight that's probably all we could do because we didn't know, although we know now. We know how to treat these patients. We're literally not treating them with any additional drugs, but we've cut the mortality rate by 85% and we've cut the number of people staying in hospitals for a very long time. There are varying numbers all across the board because people look at it very differently. And I know some of you may have seen the reports from Dr. Fauci yesterday that he estimated that 40% of all patients in the hospital back in the early days of this crisis were COVID. Well, yes, that's probably true because they got rid of all the other patients. I'm on the board of a not-for-profit hospital that has over 300 beds, and we averaged three patients for 2.5 months. So it doesn't take many of those three patients to be COVID patients to make those numbers look skewed. So you've to be very careful with what you're looking at. But our hospitals are in good liquidity positions. The volumes have come back very strong, and we expect the coverage will continue. I think the second part of your question was on developments. We will continue to see development activity. But from a dollar standpoint or a percentage standpoint of our portfolio, it will never decrease just because we've grown so very big. I think that any given year we'll probably have less than 10 total development projects, but that just won't be a large percentage.

Your next question comes from the line of Jon Petersen with Jefferies.

I'm curious if you've seen any incremental interest from the nonprofit hospitals. I know in the past you've talked about that as a big opportunity that you're trying to break into. I don't know if anything has changed there with COVID in terms of any other situations that have opened up opportunities. And then maybe just to ask another way, more broadly, are there any different types of hospital owners or property types or regions where COVID has kind of changed the conversation and opened more opportunities for acquisitions in the future?

So from a not-for-profit standpoint, I would certainly like to see more not-for-profit activity. I think that given the way that their structure is and their leadership structure, we just haven't seen that. What we have continued to see is the not-for-profits really moving toward selling as opposed to these types of routes. We will still push that avenue. There are a lot of not-for-profits out there we'd like to do business with, and we'll continue to push that. But it just hasn't been what I thought it would be 20 years ago when we started this company. From other opportunities because of COVID, I think the opportunities really align with the fact that those that have really figured out that they can operate in this environment continue to do well. It wasn't the disaster that we all feared in March for hospitals. And so the opportunities are that there are good people out there that we know very well. I've been in this business for 35 years. I know just about everybody and those everybody either knows me or somebody that we've done business with. I get a lot more phone calls today. In the last three months, I've gotten a lot of phone calls from old friends that I've done business with that are interested in doing something else. So yes, I think from that standpoint, there are lots of opportunities out there.

All right. And then the election is less than a week away. I guess if we wake up next Wednesday morning or in a month from now and Biden is President, should MPT stock go up or down the next day?

Well, I think that as Steve and I have literally said since we started this company — because you remember when we first started it, there were discussions about all the various changes to health care and there are probably six or seven different health care reforms floating around before Obama finally got elected and we all settled on the ACA — it really doesn't matter for MPT. If you look back at all of those various forms of health care reform, the total number of dollars in the bucket didn't change at all. What did change is the payer mix and how that number of dollars was allocated. But the hospitals continue to be paid. They continue to get roughly the same amount of dollars; depending on what states you're in, it was allocated differently. But from an overall truly nonpartisan standpoint, it really doesn't matter who gets elected long term. Obviously, short term, there may be a boost just because people think that the ACA is this wonderful thing for hospitals and without Trump it probably won't go away. But we think that it really doesn't matter whether it's a Trump election or a Biden election from that standpoint.

Your next question comes from the line of Michael Lewis with Truist.

So I certainly understand the enthusiasm: the portfolio weathering a pandemic and doing well. Now that it looks like we're headed toward a higher number of COVID cases, in wave one, I suppose maybe the risk was holding beds. It sounds like you think we won't do that again. What's the risk in wave two if the cases continue to go up? Do you feel like we've kind of figured this out and can handle it now? Or what are some things we should look for if the cases continue to trend up like this?

Mike, that's a fair question. Clearly, if you look at the numbers, they are indeed trending up. I don't think any of us know at this point how much of that is related to the fact that we've got a lot more testing out there and people are being tested more often. But clearly, they're going up. I think the good news from an overall world standpoint is this: if you look at our hospitals in the Southern Hemisphere, Australia has about 130 patients currently of COVID patients in a fairly large country and it's kind of isolated. They have done a very good job. If you look at the number of people getting COVID, very few of them are ending up in the hospital like they did originally back in March, April, May and even June. And most importantly, as I reported earlier, the lower mortality rates — that's with no real additional drugs; that's truly just with hospitals understanding how to treat patients better. You have to be very careful of what you listen to on our 24-hour news cycles because they report snippets. Let me give you an example. When COVID first hit, every hospital that we own greatly increased the size of their ICUs. They all have the ability to adjust bed configuration. It's one of the reasons why we've done so well in business from the early days on: we understand how to run hospitals. The number of people here, including myself, actually ran hospitals originally. And so we understand how to do bed reconfiguration and give the approval for that from a very quick standpoint. So if you look where we are today, most hospitals have decreased the number of those COVID ICU beds to go back to somewhat of a normal standpoint. So even if you hear a hospital that the news has reported may be running out of ICU beds, that's probably a misleading number. I know of one in particular where this was reported because they had jumped up to more than 30 ICU beds for COVID patients. The COVID patients never materialized, so they dropped that back down to three COVID patients, and they were full of three COVID patients. But they had the ability to bump the other beds back up. I think that the worst thing that could happen to the country, to the world, to our hospitals would be if we decided that we needed to cut elective surgeries. That just didn't help us. Again, I'm not pointing fingers at anyone. We were all operating in a vacuum and didn't know what to expect with COVID. But we had hospitals all over this country that sat totally vacant. One of the things that is just now starting to be reported, and we'll probably learn more about it in a few years, is the number of people that died not of COVID directly, but because they couldn't get to a hospital to be treated. I told you, I'm on the board of a not-for-profit hospital with over 300 beds, and I asked our management during this period — we literally had three patients. I said I know all of those patients, particularly the cancer patients, still need treatment. What's happening? And the answer was they weren't getting treated. So hopefully no one will make that mistake again and we won't go to a shutdown. If you look at Europe, the announcements that just came out in Germany and France yesterday, the hospitals weren't shut down, the elective surgeries weren't shut down. If you look in Italy and Spain, which were obviously two of the hardest hit countries early on, I'm in daily contact with our CEOs there. They both feel very, very good about where they are despite the fact that the numbers are officially going up. The hospital utilization and the deaths in those numbers are not what they were in March, April, May and June. So unless we have a terrible political decision about what to do with hospitals, we should be in very good shape.

Okay, great. And then I had just a quick one for Steve. On the tax rate change, you mentioned it was one-time. So a tax rate change sounds to me like maybe that would be a permanent change, but there's nothing going forward here that should impact a higher tax rate going forward?

No, it's a good question. The increase in rate does go forward. The big hit we took this quarter was to account for a purchase accounting adjustment related to the $2 billion acquisition in January. There were some tax liabilities that we basically had to reprice as of that acquisition date. Going forward, it will have a minuscule impact on our yield.

Okay, that makes a lot of sense. And then just lastly for me: I wanted to ask about the upsized Colombia investment. Did the yield change on that? In other words, are you earning a return on that incremental amount? And then just yields in general in the pipeline: the low financing might make you think that yields could come in, but then there's maybe a perceived risk premium. Are you seeing yields in the pipeline in general move at all?

I would answer that very marginally. If you compare what we've done recently and what we think the most near-term transactions will be, we're certainly, in our view with minimal exception, not seeing any further cap rate compression. So the cap rates we've talked about starting last year to this year, U.S. versus international, we continue to get at least those rates, and marginally it's upwards rather than downwards.

Okay. And on Colombia specifically, did the yield change with the incremental investment?

The yield didn't change. But to answer your question, we are getting that yield on that incremental $35 million.

There are no further questions at this time. I would now like to turn the call back over to Mr. Aldag for closing remarks.

Wendy, thank you very much, and I appreciate all of your interest today. I appreciate your questions. If you have any additional questions for us, please don't hesitate to reach out to Drew or Tim, and we'll get back to you as quickly as we can. Again, these are great times for MPT. I couldn't be more excited about where we are and more excited about the future of MPT. Thank you very much.

This concludes today's conference call. You may now disconnect.